Domestic and Foreign Mutual Funds in Mexico: Do They Behave Differently?

May 13, 2015

Preview Citation

Format: Chicago

Jasmine Xiao. Domestic and Foreign Mutual Funds in Mexico: Do They Behave Differently?, (USA: International Monetary Fund, 2015) accessed November 9, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper utilizes a new dataset of foreign and domestic mutual funds in Mexico to assess their behavior and obtains three new findings. First, foreign mutual funds are more sensitive to global financial conditions and engage more in herding and positive feedback trading than domestic mutual funds, notably during episodes of market stress. Second, the behavior of foreign funds differs substantially across types of funds: bond funds are more sensitive to global factors and engage more in positive feedback trading than equity funds; funds sold to retail investors, open-end funds, small funds, and regional funds also appear to be less stable sources of capital flows. Third, there is indicative evidence that foreign funds’ trading behavior is associated with higher local market volatilities, notably in periods of market stress; however, domestic mutual fund investors played some mitigating role.

Subject: Bonds, Financial institutions, Flow of funds, Global financial crisis of 2008-2009, Mutual funds, National accounts, Sovereign bonds, Stocks

Keywords: Bonds, Capital flows, Emerging markets, Excess demand, Feedback trading, Flow dataset, Flow of funds, Fund characteristic, Fund flow, Global, Global bond, Herding, Herding behavior, Mutual funds, Purchase fund, Regression model, Sovereign bonds, Stocks, WP

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/104
Stock No:

WPIEA2015104
ISBN:

9781475589542
ISSN:

1018-5941

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